- USD/JPY sees late rally, jumps to 142.60.
- The US Dollar is paring back the day’s losses as the Yen declines.
- US inflation continues to erode faster than expected.
The USD/JPY is rallying into new highs on Friday as the US Dollar (USD) tries to pare back some of the day’s losses coupled with a broad-market weakening of the Japanese Yen (USD) as markets get set to wrap up the last day of trading before the holiday break and the last full trading week of 2023.
The Yen saw an early bump on Friday after Japanese National Consumer Price Index (CPI) Inflation printed more or less as-expected, with Core Japan CPI (headline CPI less fresh food prices) for the year through November meeting market forecasts of 2.5% versus the previous print of 2.9%.
Japanese inflation continues to fall back towards the Bank of Japan’s (BoJ) 2% target, but the BoJ continues to undercut market hopes for a hawkish pivot from the Japanese central bank. The BoJ remains unconvinced that Japanese inflation will continue to hold above 2% looking foward, and the BoJ remains firmly entrenched in hyper easy monetary policy with negative interest rates.
The BoJ currently expects inflation to decline below a 2% annual rate sometime in 2025.
The US Dollar declined once more on Friday after the US Personal Consumption Expenditures (PCE) Price Index declined faster than expected, seeing a resurgence in rate cut expectations from the markets. The Greenback is now paring back the day’s losses heading into the back half of the week’s final trading session.
The Core US PCE Price Index for the year through November softened to 3.2%, below the market forecast of 3.3% and easing back further from the previous print of 3.4% (revised down from 3.5%).
Read More: US PCE inflation softens to 2.6% from a year ago vs. 2.8% expected
Declining US inflation has weighed on the US Dollar this week, igniting a resurgence in investor expectations of an increased pace of rate cuts in 2024. Market rate cut expectations may have run far ahead of what the Fed considered feasible, however: the Fed’s dot plot of interest rate expectations show a median forecast of 75 basis points in rate cuts through the end of 2024, but markets are currently pricing in bets of 160 basis points in cumulative rate cuts, with some particularly over-eager market participants betting on a rate cut as soon as next March.
USD/JPY Technical Outlook
The USD/JPY set a new high for Friday at 142.66, stopping just short of the 50-hour Simple Moving Average (SMA) as the pair gets hung up on near-term resistance levels.
Despite USD/JPY’s Friday rebound, the pair remains firmly bearish, with an unavoidable lower-highs pattern baked into the charts.
The pair remains constrained at the 200-day SMA rising into the 143.00 handle, and the USD/JPY is down over six percent from November’s peak bids near 151.90.
USD/JPY Hourly Chart
USD/JPY Daily Chart
USD/JPY Technical Levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD turns negative near 1.0760
The sudden bout of strength in the Greenback sponsored the resurgence of the selling pressure in the risk complex, dragging EUR/USD to the area of daily lows near 1.0760.
GBP/USD comes under pressure and challenges 1.2500
GBP/USD now rapidly loses momentum and gives away initial gains, returning to the 1.2500 region on the back of the strong comeback of the US Dollar.
Gold retreats from highs on stronger Dollar, yields
XAU/USD trims part of its initial advance in response to the jump in the Dollar's buying interest and the re-emergence of the upside pressure in US yields.
XRP tests support at $0.50 as Ripple joins alliance to work on blockchain recovery
XRP trades around $0.5174 early on Friday, wiping out gains from earlier in the week, as Ripple announced it has joined an alliance to support digital asset recovery alongside Hedera and the Algorand Foundation.
Week ahead – US inflation numbers to shake Fed rate cut bets
Fed rate-cut speculators rest hopes on US inflation data. After dovish BoE, pound traders turn to UK job numbers. Will a strong labor market convince the RBA to hike? More Chinese data on tap amid signs of slow Q2 start.